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Peter Billington Stereo, Inc.supplies car radios to auto manufacturers and is going to establish a new plant. The company is undecided between Dallas and Detroit as the site. The fixed costs in Dallas are lover because of cheaper land costs however the variable costs in Dallas are higher since shipping distances would increase.

Given the following costs:

Dallas Detroit

Fixed Costs $600,000 $800,000

Variable Costs$28/radio $22/radio

A. Perform an analysis of the voume over which each location is preferable.

B. How does your answer change if Dalla's fixed costs increase by 10%?

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